“October’s distinguishing feature is the poor covenant protection in the lowest-rated credits,” says Alexander Dill, head of covenant research at Moody’s. “For Caa-rated bonds, the historical relationship between ratings and covenant quality broke down in October after holding [in September].”

Of the bonds with Caa ratings, the lowest on the Moody’s scale, 31% are in the rating agency’s weakest covenant quality category, compared with 3.5% historically and 7.7% in September. The low average covenant quality scores were due largely to significant liens and structural subordination risk. Usually lower-rated bonds have stronger covenant packages than higher-rated bonds because investors expect weaker credits to offer more protection.

In the higher Ba and single B rating categories, October’s bonds showed improved covenant protection over those issued in September. But both private equity-sponsored and secured bonds showed worsening protection, with lower average CQ scores than in both September and historically.

Amey Stone is Barron’s Income Investing blogger and Current Yield columnist. She was formerly a managing editor at CBS MoneyWatch, MSN Money and AOL DailyFinance. Her responsibilities included overseeing market coverage and personal finance topics. Prior to those roles, she was a senior writer at BusinessWeek where she authored the Street Wise column online and contributed to the magazine’s Inside Wall Street column. Topics covered included economics, corporate finance, Fed policy, municipal bonds, mutual funds and dividend investing. She co-authored King of Capital, a biography of Citigroup Chairman Sandy Weill. She is a graduate of Yale University and Columbia University’s Graduate School of Journalism.